HyTerra faces funding pressure after weak McCoy-1 production result

McCoy-1 produces weak flow in first-zone test

HyTerra’s flagship Kansas test has delivered a sobering result: the first zone at McCoy-1 produced an estimated 0.1 Mscf/d of gas at the end of a 14-day flow test. Air-corrected concentrations were 2.8% helium and 0.4% hydrogen, with the company saying the tested interval showed low gas saturation.

The result means HyTerra will not proceed with the proposed second-zone test at this stage. The company said methane and hydrogen measurements may have been affected by secondary processes in the wellbore, adding an important qualification to an already limited result. McCoy-1 tested one location and interval within the Ridge Play, rather than the broader Kansas portfolio.

The test was completed on schedule, below budget and without reported health, safety or environmental incidents. Water was recovered at approximately 300 barrels per day, while no fracture stimulation was undertaken. The immediate technical task is to integrate the gas composition, pressure, flow-rate and reservoir data before deciding whether further appraisal at McCoy-1 is warranted.

Ridge Play reassessed as Rift Play takes priority

The outcome marks a clear setback for the Ridge Play thesis, where HyTerra’s model envisages hydrogen migrating from the Midcontinent Rift towards the Nemaha Ridge. The company says the operational and technical lessons from McCoy-1 will now feed into its “Must Haves” framework, which ranks prospects, selects well locations and shapes future drilling and testing programs. Earlier coverage reported the same well’s low flow and deferred second-zone testing in the McCoy-1 test results.

HyTerra is instead highlighting the Rift Play, which accounts for more than 80% of its Kansas acreage and targets hydrogen closer to the iron-rich Midcontinent Rift source rocks. Larson 1-14 remains the company’s highest-ranked candidate and holds a renewed permit to drill, although timing depends on funding and rig availability. That makes the next well a technical and financial decision rather than an automatic continuation of the McCoy-1 program.

Cash preservation becomes more important

HyTerra ended the September quarter with A$4.66 million in cash after raising approximately A$1.97 million through the shortfall offer. Quarterly operating and investing outflows totalled A$1.304 million, producing the company’s reported estimate of 3.57 quarters of available funding. That calculation is a simple runway measure, not a forecast of future expenditure, and drilling Larson 1-14 or other growth activity could change the picture.

The company says recurring corporate overheads fell by approximately 30% on a cash basis, or 21% after the costs of new initiatives were included. Chief executive Riley Kemp has elected to forgo A$70,000 of FY2027 cash salary in exchange for equity incentives, while director John Langoulant AO has agreed to take fees in shares subject to shareholder approval. The company’s earlier overhead reduction plan also included the proposed 20:1 share consolidation and a sponsored US ADR program, neither of which creates new capital for HyTerra.

Shareholder votes and funding decisions ahead

HyTerra’s extraordinary general meeting on 4 November will consider the 20:1 consolidation, an employee incentive securities plan, performance rights and options for executives, and share-based fees for Langoulant. The proposed ADR program is intended to improve US investor access but remains subject to appointing a depositary bank and meeting its requirements.

For shareholders, the central question is now how much of the remaining cash should be directed towards a new Rift Play test, further Ridge Play interpretation or broader US and international opportunities. The McCoy-1 data has not eliminated the geological hydrogen thesis across HyTerra’s acreage, but it has reduced the immediate technical support for spending more on this particular well.